First it was Venezuela’s citizens. Now it's Iranians. After reaching a peak during the bull market at the end of last year, bitcoin trading volume had declined substantially this year. But the announcement of trading sanctions against Iran by U.S. President Donald Trump reversed the fall. Bitcoin trading volumes are rising once again in Iran.
Faced with the prospect of an economic slowdown due to the sanctions, capital controls and rapid deflation in the value of their national currency, Iranians are turning to cryptocurrencies and bitcoin to generate profits and growth. Earlier this year, Mohammed Reza Pour-Ebrahimi told the Iranian parliament more than $2.5 billion had been sent out of the country to purchase cryptocurrencies. According to him, a majority of Iranian investors are investing in cryptocurrencies for “speculative activities and huge profits.” The Iranian central bank had banned bitcoin-related transactions for entities under its controls to prevent capital flight.
High Bitcoin Prices
A report on online publication CCN’s website quotes an anonymous source as saying that the purchase price for bitcoin using local cryptocurrency has almost doubled in Iran’s underground market within a single month. Presumably, that increase is due to heavy demand from investors. (See also: Iranians Turning To Bitcoin For Money Transfers).
In that respect, the situation in Iran resembles the one in Venezuela, where bitcoin trading shot up due to skyrocketing inflation. Venezuela’s economy is wracked by hyper-inflation and a massively devalued national currency. The South American country has already announced Petro, a cryptocurrency, to circumvent trade sanctions and kickstart the economy. (See also: Venezuela Claims To Have Pre-sold $735 Million Worth Of Petro Already).
To be sure, the Iranian government’s stance cannot be completely characterized as anti-crypto. It is among the few governments exploring the use of cryptocurrencies in its economy. Last year, an Iranian minister announced that the government was developing infrastructure required for cryptocurrencies to function in the economy. In February this year, he said the ICT ministry would test a cryptocurrency developed by Iran’s Post Bank. (See also: Iran's Central Bank Rebukes Bitcoin; May Develop Own Cryptocurrency).
Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin and litecoin.